This week the President signed into law legislation authored by South Dakota’s US Senator John Thune known as the Internet Tax Freedom Act (ITFA). By permanently barring state and local government from taxing access to the Internet, ITFA is a huge victory for both consumers and small businesses.
Over 10,000 different state and local taxing jurisdictions across the country apply high tax rates on communications services. While state tax rates generally run at approximately seven percent, telephone and cable services are taxed at a rate of 17% and 12% respectively. If the Internet is taxed in the same way, consumers would be burdened with an excessive 25% in total taxes on communications services.
Since the early days of the Internet, Congress had passed a series of bills temporarily preventing state and local governments from applying these extremely high taxes to Internet access. As noted by the Internet Tax Freedom Act Coalition:
Originally enacted in 1998, and extended seven times with overwhelming bipartisan support, ITFA has protected most consumers from paying state and local taxes on their Internet access services. It has also protected Internet commerce from multiple and discriminatory taxation. Without this legislation, Internet access would likely be subject to the high rates of taxation currently imposed on traditional telecommunication services – which are often taxed at rates more than double those imposed on other goods and services. A threat made even more imminent after the FCC’s reclassification of broadband services as a telecommunications service.
South Dakota is one of seven states that have collected Internet taxes. For South Dakotans, combined state and local internet taxes cost about $15 million a year. So it is no surprise that ITFA garnered support from a broad collection of lawmakers, manufacturers, and technology companies. These seven states now have until summer of 2020 to phase out their taxes.
Cost is a huge factor in determining whether or not consumers are able to access the Internet. Making Internet services more affordable will help fuel economic growth in our state connecting more budding entrepreneurs to new markets domestically and abroad. There are a lot more potential Internet entrepreneurs in our state than little old me. The Internet can help us become our own success story.
Eliminating the Internet tax also opens a gateway to educational opportunities and better healthcare services to more consumers regardless of income or residence.
South Dakotans everywhere should congratulate and thank Senator Thune for his strong leadership to engender the necessary support to get this legislation across the finish line. The result will be higher broadband adoption rates among consumers and a ‘net’ win for all Americans.
So as SD and local governments are scrambling to balance budgets it’s good to know Thune has the guts to cut our budgets while doing nothing to cut federal spending and raising our debt ceiling. I guess we better get ready to raise the sales tax again next year.
When you’re the chair of the commerce committee I guess you need to payback the campaign donations from the big telecoms.
Does Deb Peters know this?
Thank you Senator Thune!
Government should not place any restraints on the Internet- the tech industry is the biggest economic driver right now and we need to stay out of its way.
Do we need to chastise Senator Rounds for opposing it? Wait, as a Governor he knows what this revenue means to a state.
As governor, Rounds liked to spend everything that he could. Our revenues were usually increasing, except his last year, and he spent everything and then some, never cut a program even when the revenues fell that last year. It doesn’t take a rocket scientist to know why Sen. Rounds would vote against it. He liked to spend other peoples money on programs he wanted.
What does revenue earned by an individual in this state mean to that individual? Isn’t that important as well?
Why should anyone tax Internet access? It’s stupid to tax something that should always be free and unfettered.
Should we be taxing food and clothing then? Maybe he would ban states from taxing food and clothes next.
Internet=luxury and if you disagree with that you are stuck on 1st world problems.
1:29-I don’t disagree that people can spend their dollars for what they need but our local governments will either cut a service or raise another tax and Senator Thune just voted to make them make that decision. Let’s put it this way….SD government from small to big runs immeasurably more efficient than the federal government. Why on Earth are you wasting time cutting taxes and revenue for SD government when you have thousands of programs costing billions of dollars to look at.
I think Sen. Thune is doing a great job but even he can be wrong sometimes.
43 states get along without taxing internet access. SD can too and the increased access to internet for lower income families is great. Helpful for education.
If we’re going to measure everything in SD by what other states pay then this seems eminently appropriate.
The real point is – why doesn’t Thune do something to cut federal taxes or spending? Instead he supports another federal intrusion into state policy.
so we like states rights but lets run pipes through peoples land even if they disagree.This guy is only a photo op.
And the pipeline company would not pay any property taxes to the counties it runs through, or the townships, and the schools? You are right, just a photo op, doesn’t benefit our local governments and schools at all !
My dad had a large pipeline run through his farm land. Got paid for it, and farmed right over the top of it for years.
Again with the photo op; why don’t you try beating a different drum once, What(sup)? You sound like an idiot repeating the same phrase over and over again while posting nothing of substance.
Glad the rest of us business owners or brick and mortar businesses can subsidize outside companies that can come into our state and use our roads and growing economy and pay nothing to use it. That means higher taxes for us. I want a level playing field, that’s conservative. Asking locals to pay more in taxes so outside companies pay nothing isn’t conservative. Fair and equal taxation to all isn’t to much to ask. I don’t disagree with Thune often but I do on this.
This was not about a sale tax on stuff bought online. This was about a tax one would have to pay to be connected to the internet. As much as I do not like new taxes, I do support a sales tax on items bought on-line, or by mail order, for the reason you stated, it levels the playing field.
Didn’t government create the Internet? So why shouldn’t there be a tax to access it? You pay for water to your faucet, right? You pay for your electricity, don’t you? I would submit those are more necessary to your life than Internet so you can surf eBay (where you don’t pay sales tax) or keep up on Orange Is the New Black.
Former US senator and Democrat presidential candidate Al Gore claimed to have invented the internet.
The feds didn’t create it, the private sector did. That is why you have to pay an internet provider for access to it.
Senator Thune, Thank you for standing up for economic freedom and the average South Dakotans burdened by the tax on internet access. You once again showed that you value principles rather than government revenue.
So will Senator Thune be repealing taxes on wireless carriers as well? No? Huh. Yeah, level playing fields. Right.
This [now] law was about taxing internet sales.
Could you please stay on topic?
But, you were trolling [again] just to bash another republican, right?
I think there is merits on both sides.
On one hand, this is consistent with the philosophy of federal domain over interstate commerce and the power to tax is the power to kill.
On the other hand, phone and cable do not get the same treatment.
That said, I don’t think the permanent ban is prudent. The lines between Internet, phone, and cable is already blurred with regard to as seen by the consumer and is likely to become more blurred in the future. Ultimately, we are going to push services to Internet.
Senator John Thune: THANK YOU FOR PROTECTING TAXPAYERS!!!
If you think this is about “protecting taxpayers”, I’ve got some lovely oceanfront property out by Kadoka you might be interested in.
What is it about then, harebrain?
Protecting out-moded cable companies from their increasingly competitive wireless counterparts.
But it would be okay to protect retailers in SD by taxing internet transactions of goods ?
But it’s okay to protect out-moded retailers in SD from their increasingly competitive internet retailers by taxing internet sales transactions?
got it, cb.
I agreed with Sen. Rounds’s position on this. It should not have passed without lifting the ban on charging sales tax for items bought online at the same time. It’s time to level that playing field.
Agreed
Like I said before if some wants to put a pipe on your land fine not mine Thune wants tO TELL YOU BUT OTHER ISSUES NOT.
What, . . . what?
Pat I don’t ever remember anyone in our State gov talking about taxing internet access. Not sure what some think this is but a ban on product sales tax it is not.